Well into President Joe Biden’s article calling for bipartisan action to rein in some of Big Tech’s businesses practices, he mentions his “vision” of the economy and how to “realize” that vision. Although his concerns hold support from select members of both parties in Congress, the actions of market participants — by the numbers — cast these perceptions in a different light.
Pursuing greater regulation of Big Tech will only further that divide between the private and public spheres’ visions by handicapping the innovators that have provided the largest benefits to the digital landscape. Rather than meddling with tech companies’ business models from the top down, policymakers should restrain their crackdown and let consumers use their dollar to hold firms accountable for their business practices.
Amid concerns over privacy, political polarization and extremism, free speech and the impact of social media on younger generations, clarion calls to hold Big Tech “accountable” often presuppose that these companies’ size means some of their power must be reined in. Biden echoes this sentiment when he writes: “When tech platforms get big enough, many find ways to promote their own products while excluding or disadvantaging competitors — or charge competitors a fortune to sell on their platform.”
The notion that big is automatically bad is fundamentally narrow-minded. It’s purely ideological thinking rather than an understanding derived from facts and counterfactuals.
One report by the American Consumer Institute (ACI) shows that “bigness” is not necessarily a curse. The nonprofit’s analysis of the biggest tech companies and their total sales by industry reveals their relative importance and demonstrates a dispersion of market power across the largest tech firms.
A tech company being big doesn’t mean it achieved that size and success through exploitative or predatory practices. Rather, it often occurs because its technology establishes a network, and that network produces network effects. As more users adopt the product or service, its value increases. Network effects were responsible for about 70 percent of the total value created in tech in 2022. Furthermore, firms that employ network effects (e.g. Twitter, Meta, Apple) have much greater valuations than those that don’t. Tech companies have an incentive to grow, and this strategy is often how they achieve it.
Ultimately, the conditions that consumers and producers enjoy on the contemporary market spell out the state of competition and consumer welfare.
With regard to consumers, the latest evidence shows not only that they’re greatly satisfied with Big Tech’s products and services, but also that they’re opposed to regulation that could put their consumption in jeopardy.
Amazon — the chief competitor in the online shopping space — has millions of satisfied customers. In a survey by ACI, although 22 percent of respondents strongly felt that Amazon is too big, 52 percent of respondents either opposed or strongly opposed “breaking up Amazon into smaller companies” and 62 percent opposed legislation or regulations that “could eliminate” their Prime services. Moreover, 97 percent were either somewhat satisfied or very satisfied with Amazon Prime services. Despite a recent slip in satisfaction, 79 percent of Amazon customers report that they are “very” or “extremely” satisfied with the company.
Other Big Tech companies also see a great majority of their users satisfied with their goods and/or services. According to 2022 data from the American Customer Satisfaction Index (ACSI), Google scored a 75 out of 100, Apple — for personal computers — scored an 82, Facebook a 61 and Twitter a 68. Microsoft has seen similar levels of satisfaction among its customers as well.
With regard to producers, contrary to Biden’s claim of Big Tech firms putting competitors at a disadvantage, competition and benefits among producers have increased as a result of Big Tech’s innovations.
For example, Google’s services helped provide $617 billion of economic activity for millions of American businesses and other forms of producers in 2021. In 2019, Amazon reportedly spent $15 billion on logistics, tools, services and programs to help its sellers — nearly all of whom are small businesses.
A study by Connected Commerce Council pointed out the great benefits small businesses derive from digital tools provided by tech companies. They found that during the COVID-19 pandemic, 40 percent of small businesses were “digitally advanced,” meaning they view digital tools as an integral part of doing business and use a larger number of tools. They also found that digitally advanced businesses had 50 percent more revenue than businesses that had significantly fewer digital tools.
The Council concluded: “Better revenue, stronger performance, greater agility and a more positive outlook on the future — all benefits derived by SMBs who are fully engaged with the Digital Safety Net.”
On competition, ACI president Steve Pociask points out polling in which small businesses say online marketplaces help them compete with larger retailers by making it easier to bring new products to market (64 percent), increasing access to new markets (59 percent) and lowering the barriers to connecting with new customers (46 percent).
If businesses didn’t have these technological tools, the cost of selling their goods and services would simply be much higher — forcing them to choose between bringing less to the table or charging higher prices for consumers.
Rooted in some legislators’ approach to regulating Big Tech is the narrow-sighted presupposition that big is bad. Evidence shows that innovations made possible by the biggest tech companies have provided overwhelming benefits for consumers and small businesses. If policymakers don’t refrain from overriding the self-regulation of tech companies, politicians’ visions will continue to be served while consumers’ needs are ignored.
Nigel Reid is a Policy Analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us on www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.